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(Sharecast News) - Zephyr Energy said in an update on Friday that the initial flow rates from the six wells operated by Slawson Exploration Company, in which it holds working interests, exceeded expectations.
The AIM-traded firm announced the acquisition of the Slawson wells on 21 December last year.
After the flow back of completion fluids in early November, the wells were brought into regular production over the last month.
Although it was still early in the life cycle, production data adjusted for uptime indicated an average flow rate of 897 barrels of oil equivalent per day net to Zephyr since inception.
Encouraged by the initial performance of the Slawson wells, Zephyr's board forecast a year-end production run rate for its non-operated asset portfolio in the Williston Basin, North Dakota, - including the Slawson wells - to range between 1,450 and 1,700 equivalent daily barrels.
That represented a mid-range increase of 51% compared to sales volumes in the third quarter of 2023 and a 43% increase over the 2022 year-end production rate of 1,103 daily barrels.
Zephyr's working interests in the Slawson wells range from 11% to 32%, with an estimated 2P reserve of 550,000 barrels of oil equivalent net to the company.
In addition to the Slawson wells, Zephyr updated the market on its Paradox project, as its operations team planned for the "twinned" redrill of the State 36-2 well.
Over the last 45 days, the planning involved input from specialised third-party service providers and discussions with Zephyr's well-control insurance providers.
The majority of the redrill's cost was expected to be covered by Zephyr's comprehensive well-control insurance policy.
On-site activities for the State 36-2 well operations, including equipment mobilisation, were completed in October and November.
Recent work included site cleanup, soil testing pending approval from the State of Utah, regrading of the drill site, and surveying and staking the State 36-2R well.
Additionally, drilling, directional, and casing design were completed, along with consultations with independent third-party experts on drilling plans and procedures and negotiations on gas marketing and infrastructure partnerships.
The Paradox project's next steps involved submitting a final drilling plan to the State of Utah and the US Bureau of Land Management as part of a sundry notice amendment to the existing State 36-3 LN-C9 well drilling permit.
Rig sourcing, selection and contracting were in progress, and planning for selecting other major service providers.
"We are extremely pleased to report the strong initial production rates from the Slawson wells, which now form a significant portion of our non-operated Williston Basin portfolio," said chief executive officer Colin Harrington.
"The new volumes will provide a significant boost to our fourth quarter sales and provide additional cash flows to the company in line with our stated strategy of leveraging non-operated investments to fund the ongoing development of the Paradox project.
"As 2023 draws towards an end, this positive development will result in Zephyr ending the year at a higher production run rate than last year."
Harrington said the firm had "grounds for considerable optimism" in 2024, which is set to be an extremely active year with substantial news flow.
"In particular, we continue to prepare for the exciting State 36-2R well redrill, for which we believe substantially all costs will be covered through insurance, and after which we hope to utilise the same rig for a second well.
"In addition to further delineating the extent of the Paradox project with the drill bit, we also look forward to delivering first regular cash flows from the Paradox project as we progress from exploration to production in the area."
At 1414 GMT, shares in Zephyr Energy were up 1.04% at 2.43p.
Reporting by Josh White for Sharecast.com.
